The weakening of consumer purchasing power is expected to continue affecting Indonesia’s economy throughout 2025. One of the main reasons is the ongoing global crisis, which has not fully recovered since the COVID-19 pandemic.
“The global situation also faces economic, energy, and geopolitical crises. As part of the global economy, Indonesia is inevitably impacted by these various levels of crises, creating significant economic pressure that weakens consumer purchasing power,” said Dr. Yudistira Hendra Permana, a lecturer at the Department of Economics and Business, Vocational College, Universitas Gadjah Mada (DEB SV UGM), on Saturday (Feb. 15).
According to Dr. Permana, the post-pandemic crisis was not immediately felt in 2022 but is now becoming evident. However, the government’s inability to anticipate this decline in 2024 and 2025 is a critical issue.
“We have been experiencing gradual deflation up to this point. The brief economic improvement at the end of last year generated optimism, but the momentum from the regional elections and the holiday season will not last long,” Dr. Permana stressed.
He noted that Indonesia’s economic growth rate has stagnated at around five percent since the COVID-19 pandemic, indicating that the economy is unstable. Additionally, job security and wages remain uncertain, leading to increased anxiety among the public.
“This situation makes people more cautious about spending money and more likely to hold back on consumption,” he explained.
Dr. Permana warned that economic uncertainty prompts people to limit their spending on essential goods like food and non-essential items.
“When demand declines, producers will also reconsider their operations, potentially leading to layoffs and job cuts,” he added.
He emphasized that the public and the government must remain vigilant and take proactive measures, as a prolonged decline in purchasing power could have long-term effects if not properly managed.
The upcoming fasting month and Eid celebrations, traditionally periods of increased consumer spending, could indicate economic conditions. However, he predicted that consumer spending during this period would differ from usual.
“I believe spending patterns this year will be somewhat different. People are more likely to save their money until the end of the year,” he observed.
Strategic measures must be taken to mitigate the decline in purchasing power, including cutting government budgets for official travel and ceremonial events, which have recently sparked public debate.
“Travel and ceremonial expenses can certainly be reduced, but if, in reality, we still see extravagant activities like luxury camping for newly inaugurated regional leaders, it shows that the government’s approach hasn’t changed. There’s no real effort to mitigate the crisis or a strong sense of urgency,” he remarked.
While budget cuts are necessary, Dr. Permana emphasized that budget reallocation must be done correctly. He pointed out that the current cabinet structure, which has expanded with new ministries, has increased the number of budget allocations.
He also highlighted that spending cuts could be applied to the Free Nutritious Meals (MBG) program, a political campaign promise by President-elect Prabowo. He suggested reconsidering the program’s budget, as its implementation remains uncertain given the country’s unstable financial situation.
“The potential budget cuts for the MBG program should be carefully reviewed, especially since the education and health budgets are being impacted and treated as secondary priorities,” he noted.
Dr. Permana stressed that education and health budgets should not be reduced, as human capital development depends on the quality of education and healthcare.
“The foundation for transformation is built on human capital through education and health, so these budgets should not be cut,” he urged.
Author: Lazuardi
Editor: Gusti Grehenson
Photo: Freepik